Efforts to link US airline rescue package to carbon targets resisted as industry faces unprecedented times

Efforts to link US airline rescue package to carbon targets resisted as industry faces unprecedented times | Covid-19

More than 8,500 passenger aircraft are estimated
to have been parked so far, around one-third of
the total global fleet.

Mon 30 Mar 2020 – Attempts have failed to link the future carbon emissions performance of US airlines to the rescue package aimed at helping the beleaguered sector through the coronavirus crisis. Congress voted last Friday to provide the US aviation industry around $60 billion in grants and potential loans as part of the total $2.2 trillion package. House Democrats proposed airlines receiving aid would have to start offsetting their carbon emissions in 2025 and reduce overall emissions by 50% by 2050 but this was rejected by the Senate. In its latest assessment of the impact of the global pandemic on the airline industry, IATA is expecting a 38% fall in global passenger traffic (RPKs) in 2020, with North America the least affected region (-27%) and Europe (-46%) the most. Concerns have been expressed over the calculation of the CORSIA baseline in which airlines will have to offset CO2 emissions above the 2019/20 average.


Before the House Democrats had proposed their bill on the financial assistance package, eight Senate Democrats had requested requirements to ensure any financial assistance for major airlines and foreign-flagged cruise lines “includes reasonable environmental requirements to address pollution…”.


In a letter to congressional leaders, the eight senators wrote: “Given the large carbon footprint of commercial aviation, requiring reductions in carbon emissions would represent a major step in curbing our nation’s greenhouse gas emissions. If we give the airline and cruise industries assistance without requiring them to be better environmental stewards, we would miss a major opportunity to combat climate change and ocean dumping.”


The request to link aid to carbon emissions reductions did not meet with approval and the bill passed unopposed in the Senate. As well as the aid to airlines and their staff, the package provides for $3 billion in payroll grants to airline contractors and $10 billion to airports in grant funding. It does not, however, provide aid to the cruise line sector.


Washington, DC-based environment group Environmental Defense Fund (EDF) was disappointed with the outcome.


“Unfortunately, big businesses and their defenders in Congress defeated an effort to invest in a cleaner, safer world by reducing pollution from airlines,” said EDF Senior Vice President, Elizabeth Gore. “If there’s a bright spot, it’s that while the requirements to reduce climate pollution ultimately did not make it into the bill, they were a top priority of leading members of Congress. That is a testament to the growing chorus of concerned citizens and voters who have made clear that the climate crisis must be a top priority for our government.”


In Europe, the hardest hit of all regions, airlines are already looking at a $76 billion loss in passenger revenues this year. In addition to financial help, they are asking the EU institutions and governments for flexibility on passenger refunds and also deferment or suspension on all en-route air traffic control charges for the remainder of 2020, as well as on aviation ticket taxes. The sector has already won a temporary waiver on the airport slots 80/20 rule which at the start of the coronavirus crisis, with passenger numbers in steep decline, had led to ‘ghost flights’.


“We applaud EU Member States and the European Parliament for their swift action, which will help European aviation to better cope with this unprecedented crisis while also avoiding unnecessary CO2 emissions,” commented Thomas Reynaert, Managing Director of Airlines for Europe on the slots decision.


By tomorrow (March 31), European airlines must report their 2019 CO2 emissions under the EU Emissions Trading System (EU ETS) and then surrender carbon allowances by April 30. The European Commission has indicated it will not delay the deadlines because of the crisis, despite calls for leniency.


According to NGO Carbon Market Watch, the price of allowances – around €25 per tonne CO2 two weeks ago – has dropped by almost 40% to a near two-year low of just above €15. An auction by ICE Futures Europe of 1,669,000 EU Aviation Allowances on behalf of the UK government on March 25 was cancelled as airlines pulled back from bidding. ICE said there were not enough bids to cover the supply being offered.


Global consumption of jet fuel averages around 7 million barrels per day and oil industry analysts have suggested demand may have now fallen by up to 50%. A report published a week ago by Rystad Energy said consumption would fall by 3 million barrels per day, with an overall 20% of demand removed for the year. Its forecast is based on an assumption the peak of the Covid-19 impact will be in April and May, with flights gradually resuming from the summer. The price of jet fuel is reported to have fallen to a 20-year low.


IATA’s latest March 24 update of its analysis of the impact of the coronavirus on the global air transport industry shows a significant deterioration from a previous forecast two weeks earlier, with passenger revenue losses double the previous estimate. The airline body is now expecting passenger revenues to be $252 billion less than in 2019, a fall of 44%. This is in a scenario in which severe travel restrictions last for up to three months, followed by a gradual economic recovery later this year.


What effect this may have on the industry’s carbon emissions this year has yet to be calculated by IATA. In a pre-crisis fact sheet issued last December, it estimated global CO2 emissions of 915 million tonnes (Mt) from the sector in 2019, with a forecasted 936 Mt in 2020. According to George Anjaparidze, CEO of Swiss economics and strategy consultancy Veritas Global, if IATA’s anticipated 38% fall in passenger demand was applied to emissions, then global CO2 from commercial air transport could fall to around 567 Mt in 2020.


Based on announced airline cancellations as a result of the pandemic, Dan Rutherford of ICCT estimates overall airline traffic (RTKs) reductions of 53% over the next two months, possibly as high as 75%, with a corresponding reduction in emissions. He points out though that historically passenger numbers bounce back quicker than expected. IATA’s update concurs that all previous pandemics had sharp drops in passenger traffic (RPKs) but equally sharp returns to previous levels (V-shaped) as they were not accompanied by recessions, although this may not be the case with Covid-19.


Whatever the precise eventual outcome, aviation emissions in 2020 are going to be considerably down on 2019 and historically anomalous. This will potentially have a serious impact on the global CORSIA carbon offsetting scheme, which is designed to ensure carbon-neutral growth of the sector from 2021. Airlines and other large civil aircraft operators are currently monitoring and reporting emissions from their international flights to establish a baseline that will be used for the duration of the planned 15-year life of CORSIA. The baseline is calculated on the average emissions for 2019 and 2020, so the expected steep decline in emissions this year will result in an artificially low baseline and require operators to buy more carbon offsets than previously anticipated. IATA has previously estimated airlines could be required to spend up to $40 billion in carbon credits between 2021 and 2035.


A Bloomberg report suggests airlines and countries, including China, have already raised the issue. The article quotes an unnamed US FAA official who said changes to the baseline are “highly likely” once the situation had been reviewed post-crisis but the roll-out of CORSIA would continue without disruption. The CORSIA agreement reached at ICAO allows for triennial reviews of the scheme, the first in 2022 before ICAO’s next Assembly later that year.


As of the end of February, ICAO lists 82 countries, representing 76.64% of international aviation activity, that have indicated they intend to take part in the initial pilot phase of CORSIA, which runs from 2021 to 2023. So far, this excludes China, India, Russia and Brazil.


Environmental Defense Fund notes the CORSIA agreement includes a provision that gives airlines flexibility to deal with the Covid-19 crisis during the pilot phase without sacrificing climate protection.


“As they move forward to implement CORSIA, ICAO governments may wish to consider invoking this flexibility provision, and may wish to convene an expert panel to examine the longer-term impacts of the crisis on CORSIA’s base years,” suggests an analysis by EDF. “The existing rules provide flexibility to governments to address suppressed activity in 2020, without any need to renegotiate the measure in a drawn-out political discussion.”


Commented Michael Gill, Executive Director of the cross-industry Air Transport Action Group: “An average of the two years was agreed in order to smooth any potential downturn in traffic in either year, but a situation as grave as the one we are currently facing was never contemplated. It is much too early to say what the impact of Covid-19 will be on the CORSIA baseline and we will continue to look at how the situation evolves over time. However, any modelling done today will be out of date in a week.


“It is very clear that 2020 is a completely abnormal situation but, in the meantime, we have an industry to rebuild and a world to reconnect.”





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